There are some financial advantages of retirement, besides the obvious one: not having to go to work. You may be able to decrease your costs to 70 or 80 percent of your current spending after you leave your job. Here are some of the major cost categories that should go away in retirement.
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1. Major home ownership costs. Hopefully, by the time you retire you will own a house debt-free. This means no mortgage or rent to worry about. Removing this big expense should be at the top of your list of things to do before you retire. If you don't have it all paid off, consider downsizing to a smaller place that you could own outright. Downsizing also has the added benefit of reducing your overall home ownership costs. Insurance, property taxes, utilities, and maintenance should all be less expensive in a smaller home.
2. Multiple car expenses. When you retire you should be able to drop one of your vehicles. This will put money in your pocket instantly upon the sale. Selling one car will also save you money on insurance and maintenance costs down the road. If you don't want or need to drive anymore, consider going completely car-less. If you live in a compact community, this could be ideal.
3. The expense of saving and some taxes. Now for the obvious one: you will no longer need to save for retirement since you'll be living in it. No more monthly contributions to your retirement account. And you'll also get to skip paying payroll taxes since you won't have a job. However, you will have to pay income tax on traditional 401(k) and IRA withdrawals.
4. High cost-of-living expenses. In retirement you'll no longer be tied to the expensive costs of the city if you don't want to be. Since you're not tied to a job, you can live where you want to and where the cost of living is cheaper. Plus, you'll no longer need to pay for services that you had to use because of time spent at work, such as dry cleaning.
5. Expensive travel. Overall travel expenses may rise, but you should be able to travel more cost-effectively in retirement. You won't need to fit your travel times around your busy work schedule. You'll be free to travel any time of the year and during the week as much as you want. You'll also have more time to plan your trips to get the best deals.
Tell us about other costs that will likely go away in retirement below.
Phil Taylor is the author of the popular 52 Ways to Make Extra Money. Find out how to save more money and get the latest news on the best online savings accounts and the best online stock brokers at his blog, PT Money: Personal Finance.